Correlation Between Westinghouse Air and MTRLimited
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air and MTRLimited at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Westinghouse Air and MTRLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westinghouse Air Brake and MTR Limited, you can compare the effects of market volatilities on Westinghouse Air and MTRLimited and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Westinghouse Air with a short position of MTRLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and MTRLimited.
Diversification Opportunities for Westinghouse Air and MTRLimited
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westinghouse and MTRLimited is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and MTR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTR Limited and Westinghouse Air is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Westinghouse Air Brake are associated (or correlated) with MTRLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTR Limited has no effect on the direction of Westinghouse Air i.e., Westinghouse Air and MTRLimited go up and down completely randomly.
Pair Corralation between Westinghouse Air and MTRLimited
Assuming the 90 days horizon Westinghouse Air Brake is expected to generate 0.58 times more return on investment than MTRLimited. However, Westinghouse Air Brake is 1.71 times less risky than MTRLimited. It trades about 0.14 of its potential returns per unit of risk. MTR Limited is currently generating about 0.04 per unit of risk. If you would invest 9,075 in Westinghouse Air Brake on August 31, 2024 and sell it today you would earn a total of 9,825 from holding Westinghouse Air Brake or generate 108.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westinghouse Air Brake vs. MTR Limited
Performance |
| Timeline |
| Westinghouse Air Brake |
| MTR Limited |
Westinghouse Air and MTRLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and MTRLimited
The main advantage of trading using opposite Westinghouse Air and MTRLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air position performs unexpectedly, MTRLimited can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in MTRLimited will offset losses from the drop in MTRLimited's long position.| Westinghouse Air vs. Union Pacific | Westinghouse Air vs. Superior Plus Corp | Westinghouse Air vs. NMI Holdings | Westinghouse Air vs. Origin Agritech |
| MTRLimited vs. Union Pacific | MTRLimited vs. Superior Plus Corp | MTRLimited vs. NMI Holdings | MTRLimited vs. Origin Agritech |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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